Gold is trading with modest losses but holding above $4,000 per ounce, a day after briefly falling below that level. Rising oil prices are weighing on the precious metal as markets focus squarely on the US Federal Reserve and the outlook for monetary policy.

The yellow metal was down 0.29% at $4,048.73 per ounce in morning trading, having shed nearly 1% at one point overnight. A Wall Street Journal report warning of a potential escalation in the Middle East conflict following the US midterm elections is pushing crude prices higher on international markets, prompting investors to price in greater near-term inflation.

The Fed is widely expected to keep interest rates unchanged on Wednesday, 28 October, with a further 25-basis-point tightening pencilled in for December. Investors are looking for clues on the future direction of monetary policy from a speech by Fed Chair Kevin Warsh, who is navigating persistently elevated inflation while facing familiar pressure from Donald Trump to cut benchmark rates.

Thursday’s release of the Personal Consumption Expenditures (PCE) price index — the Fed’s preferred measure of underlying inflation — is expected to provide markets with additional guidance on the central bank’s next steps. The indicator is forecast to have risen from 3.4% to 3.6% in September.

Further declines in gold could be in store, with the metal at risk of falling further given thin liquidity and room for interest rates to continue rising, according to Yuxuan Tang, head of interest rate and foreign exchange strategy for Asia at JPMorgan Private Bank. “Gold will find a solid floor when rates peak,” Tang added, as quoted by Bloomberg.